Marco de Wit April 27, 2021
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Table of Contents

Chapter I. Laws of action

 

Chapter II

Laws of interaction 

 

 

Methodological individualism

There is no group consciousness. Only individuals act. Groups do not act even if individual actions can be coordinated so that it may look like a group acts. Group action is only a metaphor. Clubs, tribes, nations and states do not act. They can be led by a small group of people either by example or by violent force. In order to understand the behavior of groups we have to study the individual actions of the members of the group.

When we are studying individuals we have to try to understand not only 1) the historical motives and purposes of acting individuals (historicism) but also the 2) empirical laws of nature (empiricism) and 3) apriori laws of action and interaction that constrain those actions (apriorism). In this way we can know what is possible and what is not. For example, the empirical natural sciences tell us that there never existed any real witches who could cast spells and fly with their brooms. Similarly, the apriori social sciences tell us that supply and demand coordinate economic interaction and frustrate such involuntary interaction as price regulations and communism. Magical witches and communist state economies never existed. By understanding not only the laws of nature but also the laws of action and interaction can we better understand at least the broad strokes of history.

 

1. Robinson Crusoe economics

To understand how the laws of action create laws of interaction it is necessary to start from the beginning. Thus, the first step is to look at a single individual confronted with physical world, i.e. nature. This can be studied with Robinson Crusoe economics that introduces empirical facts into the chain of praxeological deduction from the action axiom. Empirical observations tell us that there is diversity in nature and people. It also tells us that leisure is a consumer good. These empirical facts are called subsidiary postulates. By joining these postulates with the laws of action it is possible to deduce Robinson Crusoe economics.

Robinson’s each action has a physical component. If his goal is to stay alive then he must homestead land and other scarce resources with his labor. These he can then transform with his knowledge and work by producing consumer and producer goods he needs to stay alive. All these actions can be studied with economic science by applying the categories and especially the laws of action.

 

ROTHBARD QUOTE

 

 

Book online

 

 

2. Categories of interaction
The next step is to study interaction. This is done by introducing Miss Thursday who has also been shipwrecked to the island. In the beginning interaction between Robinson and Thursday makes the problem of scarcity even worse. Robinson cannot wholly control his body and the resources of the island if Thursday also wants to decide over their use. Immediately a possible conflict over the use of scarce resources presents itself. The more they interact with each other the more inevitable the conflict. There are only three possible ways to solve conflicts:

1. Common ownership. (Communism/socialism)
2. Private property. (Propertarianism/libertarianism)
3. Slavery. (Interventionism/Fascism)

 

ROTHBARD QUOTE

 

3. Communism
Robinson and Miss Thursday can choose to adopt the property rules of communism. They agree that their bodies and the whole island are the common property of both of them. However, soon Robinson and Thursday notice that they often have disagreements. After all, conflicts over scarce resources are not avoided by hoping that conflicts will not arise. On the contrary. Scarcity is the ultimate problem of society and conflict over physical resources are not only possible but practically inevitable as long as there is interaction between people with different values and opinions.

In practice pure communism is only possible between a mother and her fetus. Their bodies are intertwined though in a parasitic relationship which can last less than a year. When the child is born and grows the communist relationship gradually evolves into a propertarian one especially with regard to their bodies. The mother and child become two distinct individuals with their own rights to their separate bodies. However, the original communist relationship between the fetus and mother easily encourages atavistic individuals to attempt to also recreate communist relationships between adult individuals. This may happen often between spouses. Especially the woman would like to establish a communist relationship with her man. First this might sound appealing to the man because seemingly everything is first shared including their bodies in cuddling and sex acts. But now also the man has committed to a communist relationship. Everything is shared and thus the rules are simple: From each according to ability, to each according to needs.

The popularity of a communist relationship is further increased by the fact that once impregnated the female is less able to produce and thus becomes more dependent on the man. The woman sees that she has given herself completely – body and soul – to the man who must also give himself completely to the woman. The man must help and protect the woman for the rest of her life. Especially the woman sees them both as totally intertwined with each other. They are one. There is no individual property but fruits of labor belong ultimately to both. This complementarity is even stronger when both want to raise children. Spouses labor for each other and the child. This leads to higher productivity in the household especially since evolution has shaped males and females complementary so that sex, pregnancy, birth and the division of labor comes naturally. Thus the household becomes a communist production unit.

 

3.1. Common pool

In communism interaction is defined as giving not only one’s body and property but also one’s labor to the common pool. Attack is defined as not giving to the common pool. Withholding of attention, sex, care and the fruits of one’s labor is exploitation and a serious crime against the community. Even leisure time becomes a source of conflict because it cannot be a reward for  more hard-working labor. More successful producer cannot have more leisure because that would lead to inequality where the more hard-working would have more leisure than the less hard-working. No one can benefit from his superior skills because that would destroy equality. There can be no competition but only equal cooperation. Naturally this applies also to services. Both can demand from each other not only kindness but also total commitment in serving each other. There can be no withholding of sex or psychological support. Everything must be given to the common pool. People must serve each other as well as possible.

Under communism there can be no individual bilateral contracts between independent individuals because there is only the common pool of people. There can only be one collective agreement how to share common property. All must agree on every single detail or otherwise communism cannot work. To avoid the tragedy of the commons it is especially important to agree that everyone gives to the common pool all that they can and takes from it only what they “really” need. Especially the needs must be regulated in great detail otherwise the collective system breaks down. But what to do when some detail of the communist agreement breaks down? From the propertarian perspective a contract and thus property rights have been violated. The contract-breaker is an aggressor who is held totally responsible and forced to fully compensate the victim. However, in pure communism the concept of an individual, contract, aggressor, victim, attack, crime and compensation are all problematic. Since the community is one single collective there can be no independent individuals and thus no individual contractors, aggressors and victims. Attacking and punishing the other is also attacking and punishing oneself. Neither can the agreement breaker become indebted since all are totally indebted to each other anyway. In fact, there can be no individual crimes nor full responsibility and remorse because these require independent individuals.

There can never be individual crimes in communism. After all, a specific need had increased and thus there was a necessary adjustment in the communist collective agreement. The adjustment was too sudden, disorganized and violent but because of increased need there still was a legitimate reason for the violence and breaking the collective agreement. The problem was not so much the violence but the inflexibility of the collective. Upholding the communist agreement is difficult in changing circumstances but everybody must do their best.

 

3.2. Physical conflicts

Even communists admit that at the present state of humanity pure communism is impossible. It cannot maintain a harmonious collective agreement between people. People are not ants. Their values, needs and opinions differ too much. But the situation is even worse. In practice even the attempt to uphold a communist collective agreement only increases scarcity and violence. Robinson and Thursday realize this and soon try to solve their disagreements over production techniques with the help of division of labor. Robinson concentrates in building and hunting while Thursday concentrates in gathering, cooking and child rearing. However, there are still recurring conflicts about risk levels and production and leisure times. For example, after Robinson returns from a surprisingly long hunting trip Thursday is enraged and hits Robinson on the face. From the communist perspective this is not a crime. The hitting only signals her desperation. When she is hitting Robinson she is also hitting herself. In fact, the violence might hurt her more than Robinson. Furthermore, she is driven to violence by circumstances which also include Robinson’s actions. After all, Robinson often goes to his hunting, fishing and leisure trips. Even worse, he spends more and more time in them despite increasing danger. Thursday feels more and more lonely and is afraid what will happen to Robinson.

It is not that Robinson has broken his word to be careful and return as fast as possible from his trips though Thursday does suspect he likes the trips too much. The problem is not the actions of Robinson but the need of Thursday to have a companion by her side. When the need of some member of the collective increases it is the duty of all to respond to that need a well as possible. Robinson has thus not done his communist duty for the common good. Maybe Robinson has not done anything wrong but he is still guilty because there is a huge unfilled need in Thursday. Her problem is also his problem. The collective suffers from a great imbalance. Robinson must somehow try to better serve Thursday’s needs. Even if he cannot return earlier from the hunting trips he can at least be more emphatic towards Thursday’s suffering. For example, he can growl when he returns to Thursday and cry together with her about the injustice of the island. Scarcity is undermining the love collective for no reason. However, it is not only Robinson who must shape up. Thursday admits that she too has not done her communist duty. She must control her temper better even when she is being exploited by Robinson’s relative inability to serve the common good.

Both Thursday and Robinson must try to serve the common good better. Both are guilty and both must improve themselves. No one is ever at fault alone. All are guilty. In fact, not only is the stingy island guilty but also the love collective itself in the sense that there is still no total agreement and sharing of feelings on everything. The unfortunate fact is that people are too selfish. No one is perfect. Disagreements and fights are inevitable between selfish people. The only thing we can do to decrease conflicts and violence is that we all together try to love each other more by becoming less selfish.

Robinson accepts this communist logic. He also realizes that decisions over production are problematic. Hunting and fishing trips are getting longer and more dangerous. This is also one reason why he would like to sometimes spend more leisure time by himself. On the other hand, Robinson realizes that the combination of increasing risk and absence is difficult for Thursday to accept. Robinson does still think that Thursday is exaggerating problems but still again accepts his own guilt. He decides to show more empathy towards Thursday’s suffering. Robinson also accepts Thursday’s use of violence even if he knows she is not going to stop venting her frustrations through violence. After all, Thursday just loves him so much.

Thursday promises to try to better control her temper but there is no punishment because she is not truly guilty of hitting Robinson on the face. Thursday, Robinson, their family collective and the island all have their share of the guilt. This is also why there is not even a remorseful pledge from Thursday to permanently change her accusatory and violent habits. After all, she cannot control Robinson, their collective and the island. She cannot even totally control herself. Nobody can totally control themselves. We are all children of mother nature. We are all one. Guilt is a mirage. Instead of individual responsibility, accountability, punishments, compensation and forgiveness we need understanding of the total circumstances and how we can together support each other by sharing both the failures and successes of the collective.

Communism decreases individual responsibility. No one has to rule out violence and all can distribute blame and responsibility for their actions. The risk of violent conflicts is thereby greatly increased. However, that is the point! Robinson and Thursday deserve the violence if they cannot together overcome their disagreements. They must learn to share their thoughts and their very essence. If violent conflicts help in this that is only good. Violence inside the collective is not real violence anyway. Members of the collective are just learning to know each other and share their feelings more deeply. Even rape is not violence. If there is an unfilled urgent need that must be somehow satisfied. The fault belongs to the collective that has failed to sufficiently take this account. The guilt belongs to the collective not to the rapist who must pitied. The collective failed him.

 

3.3. Psychological conflicts

Communism does not remove violent conflicts but only increases them by decreasing the incentives to produce and keep one’s word. However, small scale household communism can still work in a limited fashion especially between a man and a woman who have a biological desire to share a life together. Evolution has shaped man and woman into a production unit just like it has shaped many animal species such as lions and wolfs. However, even on this most animalistic and simple level communism still creates serious problems especially in the production of services. Unlike physical products it is more difficult to divide psychological services since it is more difficult to delineate and quantify them. It is more easy to disagree about the quantity of services such as empathy, care and kindness. This problem becomes even greater if one of the spouses if highly emotional and needs constant psychological support. Communism then further exacerbates the problems involved in the production of psychological services.

Evolution has made the female more communist in average. The female has a greater tendency to apply communist rules not only to the child but also to the man. If a woman has strong communist tendencies then all her needs becomes man’s needs and vice versa. Thus the woman is relatively more eager to serve the man and fulfill his every desire as well as she can. Woman gives not only her body and labor but also her soul, or more precisely she tries to adapt psychologically to the man in order to create a more psychologically complementary unit. At the same time the woman demands the same from the man. If the woman feels down for some reason then the man must cheer her up. If the man does not do this well enough then he is guilty of a withholding attack just like if he would withhold food from the woman.

A lack of psychological commitment and support threatens the very foundations of a communist relationship. It is not the quantity and quality of the act (cheering up) which determines the severity of the imbalance but the relationship between the man’s will to contribute and the woman’s need to be served. Even if the man does his best he can still become criminal if the needs of the woman keeps increasing. This might sound unreasonable but from the communist perspective it is not. After all, unlike with scarce physical commodities there is much less scarcity in psychological services. If the man really would want to help the woman to cheer up then he probably could invest much more qualitative and even quantitative effort to it. Naturally this would decrease the amount of leisure for the man but that is irrelevant in the sense that personal leisure is also withholding of services to the common pool. If the woman and man have different amounts of personal leisure that automatically causes a conflict in the provision of services and undermines the communist order. After all, both are part of the whole and must equally serve each other.

The woman might become convinced that without sufficient cheering up services her life becomes so meaningless that she will loose her mind and whither away. This then makes the man’s relative withholding of cheering up services even more serious. Even if the man understands the seriousness of the situation and does his absolute best to cheer up the woman it is to no avail if woman’s needs are not fulfilled. The seriousness of withholding is more dependent on the need than on the ability. Scarcity creates practically unlimited needs and especially in psychological relations the demander can always feel totally left out. Especially for children and females the demand is usually greater in psychological services than in physical products because the scarcity of the latter is more evident. Demanding others to change their attitude is much more realistic than demanding that other produce more physical products.

The problem with communism is thus not only that people are different but also that there is an almost unlimited demand for both physical products and especially psychological services. Communism is in a constant state of psychological famine. It is not only that people do not offer enough physical labor to the common pool but that they do not offer enough psychological labor services. The latter is even more serious since obviously their production can be increased more than physical production. Thus there is not only a psychological famine but also criminal atmosphere where people are all the time trying to avoid their psychological duties. This can easily lead to violence where it is just to kill others for their criminal indifference. For example, if the woman feels strongly enough about man’s psychological “betrayal” in the production of cheering up services then it is even just to kill the man. After all, the man is exploiting the woman by not offering enough psychological support. The man has killed the communist unit and become a capitalist exploiter who puts his own leisure time above her needs. Killing them both would do them a service by liberating them from evil capitalism. Better to die than live in an unjust loveless universe. Or the woman decides to kill only herself. Better to die than live an unjust life without love.

The ultimate problem for Thursday is not Robinson’s perceived indifference but scarcity. Thursday realizes that there is something fundamentally wrong in both the island and Robinson. She realizes that the problem of scarcity must be solved by increasing supply either by changing the laws of nature or the nature of the people. She dreams of reaching the utopian final stage of communism where scarcity is overcome with new technology and superior methods of communist production. However, there is only three people and hardly any technology on the island. But Thursday has an idea. She tries to change the laws of nature with magical invocations. Thursday uses many days to prepare complicated magical rituals but the spirits of the land fail to increase production. Food becomes even more scarce. This also sours the relationship with Robinson who becomes frustrated with her useless attempts at magic.

Thursday realizes that the magical spirits are not helping her. Perhaps she has offended them somehow. But there is another alternative. She has to save the communist relationship by changing the nature of Robinson. First she tries love magic and secret love potions. However, Robinson just becomes sick and almost dies of poisoning. She then tries to convince Robinson that love conquers all. If they just loved each other and the baby enough then they all would become more happy and Robinson would not need so much personal leisure time. Thursday emphasizes her love and Robinson agrees to stay together more. They now concentrate in loving each other more. After a few months food becomes even more scarce and Robinson starts to turn ever more hostile and dictatorial. There are more fights which often turn violent. Thursday is shocked that Robinson does not love her anymore.

Thursday now realizes that there is only one communist alternative left. If supply cannot be increased then demand must be decreased. But Thursday cannot stop loving. She must receive a lot of love or otherwise life has no meaning. Moreover, they all still need food. Thursday starts to hate the stingy evil island and considers mass suicide as an escape from scarcity. That would teach the island a lesson. In heaven there is no scarcity so she considers poisoning them all. That would do good for Robinson who obviously has stopped loving her. But the child is still full of love and thus must not be killed. Soon Thursday realizes that there is only one alternative left: Decrease the number of people so that there would be enough free fruits of land for all. Red communism becomes green communism. Thursday decides to kill herself since then there is more food left for the child and Robinson. Gaining Robinson’s total love was hopeless anyway. Better to die than live without love.

Robinson is distraught by Thursday’s suicide. Soon their child becomes ill and dies. Robinson is again all alone.

 

4. Propertarianism

After a few years Friday comes to the island. When Robinson and Friday meet neither is interested in communism. Instead they both support the first-user-rule, i.e. propertarianism. Both own their own bodies and physical objects they have homesteaded, produced or received contractually. Thus if Robinson has homesteaded the whole island then he has the right to refuse Friday entry. Or Robinson can sell or rent part of the island to Friday in exchange for his labor or property. Only if the island is really small and lacking in natural resources might it be in the economic interest of Robinson to refuse to sell or rent any land and thus refuse Friday entry to island. This would then be similar to a minus-sum lifeboat situation where allowing one more person into the lifeboat decreases the available food and water resources for the rest. Outside of lifeboats such a situation is extremely rare since usually cooperation increases production and benefits all. Even when there is no more free land it is in the economic interest of the land owners to sell or rent land. In practice propertarianism always leads to mutually beneficial cooperation.

Propertarianism is not only beneficial to all but also natural. It respects natural order in the sense that it tries to peacefully solve the ultimate problem of life: Scarcity. Private property rights are necessary since there is no other peaceful way to solve conflicts over scarce resources. Each individual naturally wants to have property rights to his own body. He is its first user and he alone can control it. It is only natural that he owns his own body and nobody else. Furthermore, it is natural that he can use his body to homestead unused land and other unused physical resources. Thereby he does not violate anyone’s control over his body or other physical resources. Even children and primitives seem to understand the first-user-rule, i.e. the homestead principle and consider it natural.

Nor does an individual violate anyone’s property rights when he transforms his physical resources with agriculture or by building a house. If he did not have the right to his farmed land, gathered fruits and produced house then who would? To ask the question is to answer it. Property rights are both logical and practical and thus natural. And if he owns a physical resource such as farm land, fruits or house then he also has the right to give it away to some other individual either as a gift or by exchanging it to another physical resource. Private property and contracts are natural and make peaceful interaction possible in the first place.

Robinson and Friday see themselves as independent individuals who have the exclusive right to control and thus own their own body and scarce resources they have homesteaded, produced or contractually obtained. Only interaction that respects the physical integrity of their respective property is allowed. Propertarianism thus sees interaction in terms of control over scarce physical resources. It is now easy to see who owns what. Society is not only based but also defined in terms of private property. Each individual is a kind of castle owner who lives in his castle (body) and from there either homesteads, produces or contractually obtains physical resources such as land and food. All rights are therefore private property rights. Robinson and Friday can only lord over their own body and homesteaded, produced, bought, rented, inherited or otherwise gifted land. Each individual is a body-castle owner with his own propertarian “personal country” and other physical possessions. All interaction is between these propertarian spheres or “personal countries”. All social interaction is voluntary and therefore peaceful. Society is purely propertarian and all interaction is contractual.

Propertarian rules allow only Pareto superior moves. In other words they allow two types of actions: They allow actions that do not physically hurt the property of others (homesteading, producing, consuming). They also allow interactions where both expect to benefit by entering into a mutually agreed upon contract concerning transfers of property titles (contracting). Propertarian society is both peaceful and beneficial since all interaction is ex ante mutually beneficial without hurting anyone physically.

Aristotelian natural law proponents such as Murray Rothbard emphasized that the natural nature of propertarianism makes it ethical. His student Hans-Hermann Hoppe agrees but is more of a Kantian and therefore developed argumentation ethics that emphasizes the logically self-evident and axiomatic nature of propertarianism. Hoppe points out that only propertarian rules can be justified since argumentation itself presupposes independent individuals with property rights. By trying to deny the first user-rule of appropriation one would enter into a performative contradiction and so in practice admit not only one’s own ownership of one’s own body but also the fact that argumentation presupposes intersubjectively ascertainable norms and other independent individuals with property rights based on appropriation, production and contracting. Propertarianism is axiomatic and thus self-evident for every rational being. No wonder even children and primitives understand it almost instinctually.

HOPPE QUOTE

 

ADD Friday and Miss Saturday

 

4.1. Gifts, barter, money and banking

Since the island is far too big to be completely homesteaded by Robinson he has to allow Friday access to the non-homesteaded parts of the island and let him homestead his own home there. After this there are two alternative course of actions possible for Robinson and Friday. One is to refuse to meet each other. This would lead to a situation where the island is divided between two hermits. Or Robinson and Friday might choose to contractually interact with each other. Only gifts (unilateral contract) and mutual exchanges (bilateral contract) can take place. Gifts start already when a mother feeds her child. Gifts usually also take place between adult individuals. Gifts occur if Robinson gives some water and bananas to a thirsty and hungry Friday. Gift giving takes also place when Robinson invites Friday to visit his home. However, this unilateral contract, i.e. a gift is made on the precondition that during the visit Friday behaves in certain manner that Robinson deems appropriate. Gifts are the first milestone in the development of human society. Even gifts have an economic aspect and can be studied with economics just like any other voluntary interaction. The law of marginal utility and especially the law of supply limits the giving of gifts. The more one gives up units of a commodity the more value they have for the supplier and the less eager is he to give more gifts.

4.2. The law of supply and demand

If Robinson and Friday get along they can start mutual exchanges. For example, Robinson can offer bananas in exchange for Friday’s oranges or work in repairing Robinson’s house. This mutually agreed upon exchange is called barter. It is the second milestone in the development of human society. It can be studied by extending economic analysis one step further into catallactics that studies the formation of exchange ratios. These are determined by the laws of supply and demand. Barter allows the development of division of labor. Both Robinson and Friday can specialize in what they are best at and both benefit from increased production. The Ricardian law of association shows that even if Robinson is better in everything than Friday both still benefit because Robinson can more easily concentrate on where his relative skills are the best. Barter makes peace profitable for both Robinson and Friday.

 

 

Even if Robinson and Friday continue interacting in a peaceful manner barter is still limited by the necessity of the double coincidence of wants. Only with the introduction of more people into the island will it be possible to develop a universally accepted medium of exchange, i.e. money. This third milestone removes the problem of the double coincidence of wants and further develops division of labor. It also creates money prices that makes possible monetary calculation and a price system that automatically coordinates production through an invisible hand better than any human or a committee ever could.

 

REED QUOTE

 

The fourth milestone in the development of economy is the development of credit banks. They make it possible to pool savings, increase investment in producer goods and make it much easier to mass produce commodities for the market. Credit banks become the coordinating nerve centers of the economy. Both the common medium of exchange (money) and banking develop spontaneously and create a highly complex and efficient market economy. In a few generations living standards rise to great heights. All this can be studied with economic science and especially monetary theory that studies money, prices, banking and capital formation.

In the propertarian free market all exchanges are voluntary and therefore the consumer is the master. Since everybody is at the same time a producer-supplier and demander-consumer there is no conflict nor a master-slave relationship. Everybody serves and is being served. Free competition allows the investors and producers to compete in offering their products to the consumer who can freely choose from the offered alternatives. Production and investment rises all around and soon create exponential economic growth.

The rise and fall of individual producers is determined by how well they serve the consumer. However, the competition is not even here aggressive since producers who loose in the competition can lower their prices, cash out and start producing something else. In the long run they too benefit from the general lowering of prices and rising living standards. They may temporarily loose as producers but they always win as consumers. In the long run everybody wins.

 

4.3. Natural elite

Under propertarian rules Robinson and Friday can interact in a purely voluntary manner without having to use any violence. Peace reigns. Moreover, they can both greatly benefit from peace and mutually beneficial exchanges. However, they have to have enough intelligence and knowledge to fully understand this. The benefits of peaceful relations are often long-term only. There is also the possibility to benefit short-term by successfully stealing and robbing. This becomes an appealing possibility especially if either Robinson or Friday is lazy and short-sighted with a very high time preference.

Conflict becomes even more appealing if people are very greedy and jealous while at the same time not committed to ethical and moral ideas about right and wrong. Thus, a propertarian society requires from its members also a minimum level of intelligence, education, self-discipline, ethics and morality. This is why animals, young children and primitives cannot create propertarian societies. And neither can intelligent people under a communist culture of intense jealousy.

Once the minimum level of intelligence and a propertarian culture is achieved it becomes relatively easy to uphold propertarian rules. After all, they are natural and thus intuitive. For example, it would be very difficult for Robinson to convince Friday to become his slave or otherwise surrender his property rights. However, the situation changes when a society becomes larger and achieves the money and especially banking economy stage. First, there is less prime land to be homesteaded. Second, the great strength of the market economy – its price signals that create a kind of invisible hand that coordinates production and consumption – is also its greatest weakness. When the link between work, saving, production and consumption becomes ever longer and abstract it is easier to convince people that violating private property rights would be beneficial.

This is why a large propertarian society requires leading individuals and institutions that actively support and uphold it. In fact, any group of people require leaders. This is because communism does not work in practice. Maintaining a complete group agreement is impossible especially when the situation is changing. Even a small ship needs a captain. Furthermore, any group benefits from the division of labor. Assigning different roles to the members of the group greatly increases the productivity of the group. A communist ship or any truly communist organization would soon sink. There have to be leaders in any organization. This is the Iron law of oligarchy. If a group wants to be efficient and successful it must have a leadership. The only question is how to choose the leadership. In communism the leadership develops from the inability of the communist order to work in practice. This will create a de facto dictatorship and a police state that has to lie and brainwash the group members to accept exploitative ruling elite.

A propertarian society creates the leadership contractually and almost automatically. It favors intelligent people who have the capability to fully understand abstract basic ideas such as rationalism, science, propertarianism, free market and the natural order. These individuals become a natural elite. First they must educate the intellectuals in rationalist philosophy, ethics and economics. Second, they must create schools, medias and other institutions that spread rationalist ideas to the masses so efficiently that they create a strong rationalist culture. Third, a large majority must understand and at least passively accept rationalist culture and propertarian institutions. Any social order will break down if a large majority actively opposes it. Fourth, the natural elite must set an example and serve as respected arbitrators and leaders of communities, academy and industry. They must actively oppose anti-rationalist ideas and socially discriminate against all anti-rationalists. Only by keeping in check anti-rationalist ideas and groups can a propertarian society be upheld.

HOPPE QUOTE

 

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5. Interventionism
If the natural elite fails in its task, then society can easily descend into interventionism. Unlike propertarianism it allows a specific later comer to take away from others the control of their homesteaded, produced or contracted property. The physical integrity and control of property is not fully protected anymore. For example, Friday decides to kill Robinson and conquer his home and land. Robinson flees to the mountains and Friday now rules his land. Thus, interventionism is based on involuntary interaction between property owners. It expropriates property from a legitimate property owner either directly by transfer or indirectly by otherwise limiting victim’s legitimate right to control his property. Interventionism is parasitic. It is a Pareto-inferior system because social welfare is demonstrably decreased. It also cannot be argumentatively justified because argumentation itself presupposes the first user-rule of appropriation, i.e. the homestead principle.

Voluntary and involuntary interaction are sort of mirror images. Economic science studies the former while political science studies the latter. When studying involuntary interaction, it is crucial to emphasize that it is also action and thus constrained by the categories and laws of praxeology. However, the study of involuntary action differs from the study of voluntary action in important respects.

First, the difference between voluntary and involuntary interaction means that economic science studies peaceful and political science aggressive interaction. Aggression is defined in physical terms as threatened or actualized action that limits the legitimate property owner’s control over the physical integrity of his property. (Body is also the property of the individual.) Aggression always involves a physical conflict between property owners. Emotional conflicts are not physical and thus not aggression.

Second, there could have been no involuntary action when Robinson lived alone on his island. There is no such thing as Robinson Crusoe politics. Unlike economics, politics requires interaction. Pure formal action politics does not exist but only interaction politics. The most basic level of political science is Robinson Crusoe and Friday politics. Thus, economics is a branch of praxeology that studies either solitary action or voluntary interaction while political science is a branch of praxeology that studies involuntary interaction.

 

5.1. The law of aggressive demand and resistive supply
The first step in the analysis of politics is to apply the law of supply and the law of demand to expropriation. However, there are important practical differences in the way economic and political science apply these laws. After all, economically it does not make sense to say that there is a mutual supply and demand at work in expropriation. The aggressor clearly has demand for some definite piece of property but the victim does not want to supply it. The aggressor, in turn, does not want to supply any or at least sufficient property to his victim who in turn clearly does not have any demand for his own exploitation. Otherwise there would be a peaceful exchange and not expropriation.

Despite this obvious difference between economics and politics they are both based on the praxeological law of marginal utility. It is therefore possible to praxeologically study the behavior of both the aggressor and the victim. The laws of supply and demand still operate though with a twist.

The victim is affected by the law of supply but in a different manner than in economics. In economic interaction commodities are exchanged either directly (barter) or indirectly through a medium of exchange (money). Ceteris paribus the more of a commodity (oranges) Friday supplies the more of a different commodity (bananas) he wants in exchange. This is because utility is ordinal. Friday’s utility of each additional relinquished/supplied orange increases while his utility of each additional received banana decreases. The same is true of Robinson in reverse. Both participants in the exchange are supplying one commodity while demanding another commodity. Both have a double role. Both Robinson and Friday are at the same time buyers/demanders and sellers/suppliers.

In political interaction there are no double roles. Both are not voluntarily willing to supply and demand commodities. (Oranges for bananas and bananas for oranges.) The demander is the aggressor and the supplier is the victim who is being expropriated and thus his supply is forced. However, the victim is still under the law of supply. Ceteris paribus the more units of a commodity (oranges) he is forced to supply the greater the lost utility for each additional expropriated unit (orange) and thus the more potential resistance there will be by Friday.

However, Friday must also consider the costs of resisting expropriation. Robinson might beat him up or even torture him unless Friday submits to being robbed of his oranges. Friday’s submits only when the expected costs of resistance are greater than the combined utility of the oranges and his freedom. Friday takes his freedom also into account not only because he hates being a victim deprived of his rights even temporarily but also because he has to calculate the risk of continued expropriation. Friday might not put his health and life in line for a few oranges. However, he might do just that if he suspects that his submission would just encourage Robinson to continue expropriations. If Friday would just submit to all of Robinson’s demands he would essentially become his permanent slave.

Robinson the aggressor is affected by the law of demand. In economic interaction the demander is a buyer who is ready to exchange his commodity for the commodity of the supplier. Ceteris paribus the more units of a commodity (oranges) Robinson demands the less utility he receives from each additional unit and is ready to exchange less for them. The same law of demand is also true when the demander is an aggressor. The more units of a commodity (oranges) Robinson expropriates the less utility he receives from each additional unit.

Robinson must also consider his costs of expropriating Friday. Robinson might have to build a trap to extort Friday to give up his oranges. Building the trap might take so much time that he has to consume two bananas. Robinson also has to calculate the risk of resistance. Friday might be able to hurt or even stop Robinson’s attack with violent self-defence. Robinson might not put his health and life in line to get a few oranges. However, he might take the risk if he suspects that Robinson will submit easily and eventually even turn into his slave.

In economics there are limits to demand since in exchange the demander must also be the supplier of either another commodity (barter) or medium of exchange (money). In politics the situation is very different. The demander does not have to supply anything or at least sufficiently to his victim. (Otherwise there would be a peaceful exchange.) Therefore, even if the utility from continued expropriation decreases there is still almost an unlimited demand for expropriation. Ceteris paribus, the aggressor will always try to maximize his income by expropriating as much as he can get away with.

In a country of absolute pacifists a few aggressors could arrive and take advantage of the situation. Since the aggressors would face very little costs and risks they could take by force as much as they want. Soon the pacifists would in effect become permanent slaves or stop being pacifists. Thus, in politics the supply is the crucial factor. It is only the resistance of the victim that in practice limits aggression and expropriation.

 

5.2. Negative invisible hand

Unlike in exchange in expropriation the costs and risks of the demander and supplier are very much interconnected. They can both radically increase each others costs and risks. Ceteris paribus, the demander-aggressor gains less and less utility from ever more expropriated units of a commodity while the supplier-victim loses more and more. Thus the aggressor is benefiting less and less from the expropriation while the victim could be resisting more and more and thus generating higher costs for the aggressor. However, if resistance does not generate too much costs for the aggressor he might just increase his aggression further. This could raise the expected costs of resistance for the victim higher than the value of the expropriated property. In that case the victim could submit to expropriation. However, if the victim instead decides to resist even harder then this could make the costs of the aggression greater than the expected income for the aggressor. In that case the aggressor could rather stop the attempted expropriation and just write off his loss.

In practice during aggression the aggressor and the victim raise the stakes in turn. Both try to evaluate their own limit and guess how far the other one is willing to go. This is similar to a price negotiation in an exchange. How far one is willing to go is determined by subjective valuations. Furthermore, both in exchange and expropriation the law of demand and the law of supply operate. In barter there is a double coincidence of wants or rather double supply and demand which determines the exchange ratio of the commodities. For example, one banana for one orange. In expropriation there is instead aggressive demand and resistive supply which determine the expropriation ratio.

In addition to threats of aggression and resistance the expropriation negotiations often also involve additional offers. For example, the aggressor might be willing to offer something to make the victim accept the expropriation more easily. For example, instead of demanding 10 oranges for nothing he might offer to extort only 9 oranges for one banana.

Even if the demander-aggressor is not offering anything in return he still does incur costs when he forces the victim to supply. Robinson used to trade one banana for one orange but now his cost could be two bananas plus one banana to expropriate Friday’s 9 oranges. Despite these costs the expropriation ratio for Robinson is clearly higher than the exchange ratio while for Friday it has not only radically decreased but he has been beaten and lives in terror of the next attack and expropriation.

In money economy mutual supply and demand create exchange ratios that are expressed in money prices which then give incentives to coordinate individual plans and thus coordinate production as if assisted by an invisible hand. Exchanges create a virtuous cycle of cooperation. In exploitation aggressive supply and resistive demand create expropriation ratios which cannot be expressed in money prices. However, the market value of the loot/loss can be evaluated in prices. The victim can thus quite accurately estimate his losses. The expropriation ratios and the value of the loot also create incentives but instead of a virtuous cycle of cooperation they lead to a cycle of regulation and escape attempts where the victim again and again tries to evade exploitation. When others learn of this exploitation they too decrease their cooperation with the aggressor who is deemed to be too dangerous and thus cooperation too risky.

In political interaction invisible hand still works but in a negative way by decreasing trade, investments and production all around. Furthermore, exploitative regulations often turn the negative hand to cause unseen consequences which then tend to further increase regulation. Thus exploitation tends to increase not only because of the unlimited nature of aggressive demand but also because of coordination problems. It is very difficult for Robinson to regulate Friday’s life and work since he can always try to skirt the regulations and prepare for a rebellion or escape from the island. If Friday is rebellious then Robinson must continually increase regulations until Friday literally lives and works in shackles like a mindless animal.

 

5.3. War
Aggression always violates property rights but in practice it proceeds in several stages. It always starts with either an open attack like a robbery or a hidden attack like stealing. When the victim notices the attack he can either surrender immediately or start a war where he passively or actively opposes the attack. The war ends when the aggressor stops his attack or when the victim is defeated through flight, death or submission.

Submission is indicated by a declaration of surrender or an equivalent symbolic action such as by rising one’s hand in the air during robbery or by ceasing to resist during rape. Submission then initiates a transfer phase where the control of victim’s property is transferred to the aggressor either temporarily like in rape or permanently like in robbery. The transfer phase is parasitic in nature and is called exploitation.

The war part of Robinson and Friday politics is something that is quite familiar to economists: the economics of war. However, from the rationalist perspective the term is doubly confusing. It down plays not only the categorical difference between voluntary and involuntary interaction but also the difference in the application of praxeological categories and laws. Praxeology must be used but with a twist that applies the categories and especially the law of supply and the law of demand into an exploitative interaction.

In studying aggression the economics of war – or rather the political science of war – starts by applying first the basic categories of praxeology. Robinson will start his aggression by weighing the anticipated costs and benefits of expropriation. In this evaluation he takes into consideration his own time preference and anticipated risks. For example, one of the anticipated risks involves resistance from Friday who might use violence against Robinson. If Robinson believes the risk worth taking he then proceeds to make a war plan and follows it unless his mind or the situation changes in a relevant way. All this can be studied with praxeology and Robinson Crusoe economics plus a few empirical subsidiary postulates from biology (the intelligence and physical strength of Robinson and Friday) and the history of ideas (the ideas and values of Robinson and Friday).

 

Read online Imperialism and the Logic of War Making

 

 

5.4. Slavery
The exploitative transfer of victim’s property rights can be either one-time aggression like robbery and rape or open-ended continuing exploitative interaction that creates a hegemonic relationship between a slave master and his slave. The slave master considers his victim just as much of his property as he would consider an animal, say a sheep. The fact that the slave master might largely leave his slave in peace does not change the fact he possesses the ultimate decision-making power in conflicts and can at any moment increase his exploitation of the victim. Sheep are not free even if the owner hardly ever dominates them. For example, the fact that Robinson leaves Friday largely in peace does not make him any less a slave if Robinson has in effect reserved himself the power to rape, tax or otherwise exploit Friday anytime he so pleases. Robinson has created a slave society where he is the slave master and Friday his exploited slave subject.

However, the hegemonic relationship is not stable. We have seen how the level of exploitation is dependent on the power of resistance which in turn is effected both by intensity of the aggression and by victims love of his freedom. Suppose Friday is very submissive and has in effect become Robinson’s slave. However, Friday still has his free will and might well change his mind. Robinson always faces the risk of resistance which could turn into a violent rebellion. What if Friday would some night sneak into Robinson’s hut and kill him while he is sleeping? Therefore, Robinson has the incentive to try to decrease potential resistance by creating an elaborate excuse for continued exploitation. In other words Robinson uses propaganda to create a cultural hegemony which then installs a false consciousness in Friday. Robinson might take advantage of his higher intelligence and education by using various religious, utilitarian or other arguments to make Friday even more submissive. For example, Robinson could claim that his rule is both inevitable and justified because the fire god is on his side and manifests whenever Robinson uses his fire weapons. If Friday has even bad rebellious thoughts the Fire God might strike at Friday from the sky or He might even burn the whole island to the ground.

Assuming that Robinson is not a dedicated sadist then it is in his interest to exploit in such a manner that enhances Friday’s productive activities. It would be in Robinson’s interest to allow Friday to possess his own personal belongings and limit exploitation in such manner that Friday can be “milked for all his worth”. For example, it is not in the interest of Robinson that Friday would get sick or die from exhaustion. Instead it is in the interest of Robinson to limit his exploitation by only taxing the productive efforts of Friday. Furthermore, it would also be in the interest of Robinson to offer Friday his freedom for a price. In this way Friday might save and work more and Robinson might maximize his exploitation profits. For this reason, private slavery tends to disappear in the long run.

The hegemonic part of Robinson Crusoe and Friday politics is something that is quite familiar to all economists: the economics of slavery. It studies the second phase of involuntary interaction. The politics of war studies the first phase by analyzing the attack, the nature of self-defence and the transfer of property rights. The politics of slavery studies the potential second phase by analyzing how a successful attacker continues to exploit the victim through a hegemonic relationship. If Robinson is not a sadist then there is a sort of “happy ending” when Friday buys his freedom from Robinson.

 

 

 

Continued in part III: The structure of the state.

 

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